The Availability of Housing and Business Investment in West Tennessee and West Kentucky

This paper examines the factors considered by various commercial banks and savings and loan associations in making loans. It finds these financial institution's lending policies affect the availability of investment funds in the area of West Tennessee and West Kentucky. The different factors of their loans and their surrounding business environment have a significant impact of the specific loan policies. A survey sponsored by the University of Tennessee at Martin was mailed to two hundred and eighty-three financial institutions in West Tennessee and West Kentucky in order to determine specific lending policies of these areas (see Appendix A). The sixty-two usable returns were received from forty-three commercial banks in West Tennessee, thirteen commercial banks in West Kentucky, four savings and loan institutions in West Tennessee and two savings and loan institutions in West Kentucky. The survey showed the following descending array in lending decisions for making a straight conventional home loan: (1) market value of the house, (2) condition, (3) location, (4) other--usually the credit history of the buyer, and (5) age of the house. However the survey indicated that the institutions emphasized a different descending array in determining the terms of the loan. The following array exists: (1) the condition of the house, (2) market value, (3) age, (4) location, and (5) other--usually the reputation and credit history of the borrower. These institutions showed a desire to increase the industrial base of the area in order to expand in housing and business investment. This study also indicates that many financial institutions help in the recruitment of new industrial firms to stimulate growth. This examination suggests that through the different lending policies offered by the commercial banks and savings and loan institutions surveyed, these financial institutions want to stimulate the growth and development of their communities.